Fundraising Innovation: Study Shows Need for New Non-Profit Finance

Most progressive organizations can dramatically increase unrestricted, sustainable revenue through disciplined financing and information sharing according to a recent study on fundraising innovation.

In 2016, a group of fundraising innovation thought leaders conducted a six month study that unearthed a critical mass of progressive organizations that are ready to launch small donor and fee for service tests, and to roll-­out proven programs, but cannot find the needed financing. Of the 35 organizations interviewed for the study, each organization was testing an average of two scalable revenue projects. These project were primarily focused on small donor fundraising, fee for service, and certification programs. Half of the organizations surveyed could raise $500,000 more annually from proven models if they had the funding to invest.

The Results: Fundraising Innovation is Widespread, Financing is Inadequate

Widespread Fundraising Innovation, particularly among smaller organizations. Smaller progressive organizations are doing a higher volume of innovative experiments, which could benefit significantly from increased funding. While some of these non-profits lack the capacity to scale, there is no shortage of consultant and intermediary support organizations to complement non-profits' existing capacities.

Proven Scalable Revenue Programs. A critical mass of larger progressive organizations have developed scalable fundraising models that, if expanded, could raise significantly more revenue. Unfortunately, the organizations lack the financing to expand these initiatives.

Experimentation and Innovation. A small number of foundations provide limited grants to progressive groups to conduct scalable revenue experimentation. Unfortunately, this form of financing is neither readily available, nor abundant enough, to optimize scalable revenue testing. Strikingly, the study found that smaller social, economic, and racial justice organizations conducted a higher volume of innovative experiments that could benefit significantly from increased funding.

Best Practice Sharing can Accelerate Learning and the Scaling of the Progressive Movement. While organizations share some best practices, there is no progressive-wide hub where results and techniques from rigorous tests are widely shared. Indeed, because the field is changing rapidly, even general best practices around grassroots fundraising are not easy to find for organizations with limited experience.

A New Path for Fundraising Innovation and Scalable Revenue

Create a Test and Innovation Fund to turbocharge experimentation and knowledge dissemination. An essential component of scaling progressive groups is to fund experimentation and prototyping. When such experiments succeed or fail, the next step is to share that information across the progressive movement. Small donor fundraising needs constant innovation as older methods (e.g. on-line, direct mail) lose steam. The Test and Innovation Fund will incentivize progressive groups to experiment more creatively. The fund will ensure that a diverse range of progressive organizations are able to participate.

Create a Growth Fund that leverages donor dollars. Our research demonstrated organizations need a relatively unavailable type of funding: recoverable grants. These investments are risk-­free to the grantee. Any income returned to the Growth Fund will be reinvested in future projects. The grantee would pay back the Growth Fund (or not) out of gross revenue from the scalable revenue project proceeds, not out of its general budget. All net income after the loan repayment would go to the non-profit organization. This model leverages funder dollars in two ways: First, the Growth Fund would re-grant this money several times in the future. Second, as the Growth Fund builds a track record, it may take out commercial loans against its track record and balance sheet – which many organizations are unwilling to do – using its cash on hand as a guarantee to leverage larger sums to invest in progressive organizations; and

Create a Center of Excellence on Scalable Revenue. Our findings support the need for a Center of Excellence (CoE). The CoE will share best practices in small donor, fee for service, or sales efforts across the progressive movement.